While most people detest the word budget, it doesn’t have to be something you hate! Mindset is key to success in anything in life, and finances are no different. Do you want money and debt to just “happen,” or do you want to have control, once and for all? Budgeting is simply mastering your money.
Why is it important to master your money?
Having the ability to control money will give you more choices to live your life and avoid the strain when bills start piling up. Money problems can lead to feelings of shame and guilt, while also putting stress on relationships. There is also fear as some people feel alone in their financial woes as they don’t share their problems with family or friends. Too often people can’t handle a surprise expense such as needing a new furnace and begin to fall behind on bills and can’t seem to catch up. When you have a budget in place, you are prepared for life’s emergencies. More importantly, you can plan ahead for retirement and have the choice to give to charities and causes important to you. If you feel sick thinking of budgeting, call it a financial map. Let’s find the best road for you to find your financial success.
Map it out and review regularly.
The first step is figuring out how much money you make and how you are spending it. Make a list to keep track of how much money is going where. While it may be a daunting task, many of my clients have found that doing this exercise actually enables them to find more money than they thought they had! It is empowering to know where your money is going, instead of wondering where it went. If you are someone who finds this exercise hard, please don’t give up. Like any life change, it takes awhile to build good habits. You will not change your diet and master an exercise routine in one day, and you shouldn’t expect to have a perfect tracking system for your finances mastered in a single day either. Celebrate the steps you do take towards better financial health, instead of focusing on the times you make mistakes. Give yourself a few months to get used to budgeting and tracking.
Remember the more comprehensive your tracking is, the better your results. You can’t expect to have a plan to pay for everything if you are not mapping out all of your expenses accurately. This seems obvious, but it is something that many people struggle with. People like to budget for the basic costs—household expenses, clothes, food and vehicle expenses—but then leave out many other costs that come up. The more comprehensive the budget, the fewer surprises there will be and hence less stress.
Creating a budget is hard work, but make sure you have a simple way of following it.
Some clients have separate envelopes or jars to ensure they don’t overspend on groceries or other monthly expenses. If tracking is easiest using the cash and envelope system, then use that method. If reviewing your debit card transactions through your monthly bank statement works best for you, do that. Keep your tracking system simple and you will have an easier time sticking to it. Remember that expenses need to be reviewed and bank statements reconciled monthly. If changes need to be made and you aren’t reviewing regularly, you can run into problems.
Tweaking The Plan & Incorporating Investing
Once you have used your budget for a few months, it’s time to tweak it. Where can you cut expenses? Where do you need to allocate more money than you thought? Have you considered your income sources- can you ask for a raise? Apply for a position that pays more? Take on a part time job to bring in more income? These are all important questions to ask yourself.
It is also time to look at where you can find money to invest. Much like budgeting, start with small steps. Maybe this means starting with $20 from each pay cheque being allocated to savings. Then after a month or two, add another $20. Before you know it, you will have a healthy monthly contribution towards saving for your retirement.
Don’t Let Inaction Stop You From Reaching Your Dreams
The hardest step to take is always the first step. Accountability will make the process easier- set time aside with someone you trust to sit down and look at your finances once and for all. It will be easier than you think, and you will leave the meeting with a sense of accomplishment and a plan to take further action. Stop the stress, and start living again… knowing that you are in control of your financial future.